Nuclear fuel wins carbon exemption - for now

24 September 2009

Processing of nuclear fuel has been granted an exemption from European Union (EU) plans to auction carbon dioxide emissions allowances from 2013, although the exemption list will be reviewed before 2010.

Currently, participants in the EU Emissions Trading Scheme receive emissions allowances for free to cover the majority of their expected carbon dioxide emissions based on their past emissions under a scheme known as 'grandfathering'. Participants then buy and sell allowances depending on what their actual emissions are. However, from 2013 the scheme will progressively reduce the free allocation and companies will be required to buy allowances in an auction.

Brussels unveiled on 18 September a draft list of industrial and business sectors it fears could relocate outside Europe to jurisdictions with weaker climate change rules in future. Among these was the 'processing of nuclear fuel', which will be given carbon emission allowances under the EU's emissions trading scheme from 2013 to 2020.

Most nuclear activities, including the generation of nuclear power, waste management and the reprocessing and recycling of used nuclear fuel will still have to purchase allowances - even uranium and thorium ore mining, despite the exemption of many other minerals. In practice, however, only a very small amount of uranium mining occurs in Europe: 345 tonnes in total in 2008, mostly from the Czech Republic.

Industries not exempted will receive 80% of emission allowances free in 2013, decreasing annually to 30% in 2020, while the balance in each year would have to be purchased in continent-wide auctions.

A European Commission report said that the list was compiled based on "the risk that companies in sectors subject to strong international competition might relocate from the EU to third countries with less stringent constraints." While power plants and reprocessing facilities clearly could not relocate, it is possible - although highly unlikely due to their mainly state-owned nature - that uranium conversion and enrichment services could be moved.

In any case, pollution permits for the exempt industries will be capped at the 2007-8 levels of the most efficient 10% of companies in a particular sector, with the final caps decided in 2011.

The draft list will be assessed by the European Parliament and EU Council of Ministers ahead of formal adoption by the Commission by the start of 2010, meaning some industries could be added or removed. This would depend on the shape of the anticipated international climate change agreement following December's UN Copenhagen conference. Brussels promised it would "review the list" after agreement was secured, giving its negotiators an additional tool to extract concessions from the EU's trading partners at Copenhagen.